MIND Technology Bags New Orders But Leaves Preferred Stockholders Out In The Rain

Offshore Seismic Research Vessel at Amazing Sunrise

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Soon after the near of Wednesday’s standard session, Intellect Technological innovation (NASDAQ:Intellect, NASDAQ:MINDP) or “Mind”, announced the receipt of an mixture $7.7 million in new orders for sonar and source controller techniques.

That stated, the enterprise had presently projected these orders to appear via and accordingly bundled them in its mentioned $22.9 million “overall ebook of company” disclosed in equally its Q1/FY2023 press release and quarterly report on Variety 10-Q final thirty day period.

These new orders had been anticipated, but it is an essential step to have them in hand. The equipment to be shipped includes multi-beam sonar devices, together with connected handling products, and seismic resource controller systems. We count on all these orders to be done and shipped in our present-day fiscal calendar year. We think these orders reveal the power in military services and exploration markets and we anticipate additional orders in the close to future.

As a result, these orders would not result in upside to the company’s previously communicated expectations.

In addition, Brain amazed investors with the decision not to declare a quarterly dividend on its 9.00% Sequence A Cumulative Favored Inventory (“Series A Most popular Stock”) for the second quarter of its fiscal yr ending January 31, 2023.

Thanks to liquidity calls for to finish these, and other, orders and the uncertainty as to the timing of selected dollars flow, we feel it prudent to defer the payment of the second quarter dividend on our Series A Most well-liked Stock. The Organization proceeds to have beneficial doing work capital and no funded credit card debt.

As the Sequence A Most popular Inventory is cumulative, the non-payment technically signifies a deferral:

The Organization may perhaps defer dividend payments on the Sequence A Chosen Stock, but the dividend is a cumulative dividend that accrues for payment in the long run. For the duration of a deferral time period, the Firm is prohibited from having to pay dividends or distributions on its common inventory, or redeeming any of those people shares. More, if the Corporation does not pay back dividends on its Series A Preferred Stock for six or far more quarters, the holders of Series A Desired Inventory will have the ideal to appoint two directors to the Firm’s board.

Whilst liquidity was by now down to a paltry $.8 million at the finish of April, administration attempted to reassure traders on the recent Q1 conference call:

MIND’s cash framework and liquidity keep on being very good. As of April 30, 2022, we had performing money of roughly $16.7 million and funds of about $817,000. We collected close to $4 million of accounts receivable in Could, so our income predicament has enhanced noticeably and we have excellent visibility on extra receivables that are imminent.

Of course, the board of administrators failed to share administration views as it made the decision to keep off on the $.95 million quarterly dividend payment.

Make sure you notice that just seven months back, the company concluded a $10.5 million stick to-on supplying of its Sequence A Favored Inventory at a price tag of $24.25 per share.

But with more than $20 million of hard cash made use of in operating actions because the commencing of FY2022, indications of distress have grow to be evident in the stock cost in current months. At Wednesday’s closing selling price of $13.40, the most popular shares ended up down around 45% from the offering selling price in November.

In FY2022, the firm elevated an supplemental $5.2 million from selling most well-liked shares into the open sector below its at-the-industry (“ATM”) supplying method with Ladenburg Thalmann.

But with the dividend yield approaching 17%, the charge of money has come to be prohibitive for the firm. Though Intellect also has the potential to provide widespread shares under the ATM, the weak inventory rate and little trading volume properly precludes the business from heading by means of this avenue.

Bottom Line

Brain Engineering bags some very well-expected orders but shocks investors with the conclusion to “defer” the quarterly dividend on its 9.00% Series A Cumulative Chosen Stock in buy to protect liquidity for evident doing the job capital needs.

Provided the firm’s ongoing liquidity troubles, I do not expect Head to capture up on the favored inventory dividend at any time soon.

With very minimal extra resources of liquidity available to the company at this issue, preferred stockholders really should very seriously think about marketing existing positions and shifting on.